Tom Lee: Investor 'dry powder' to boost market

Investors have had plenty of room to buy stocks on margin, but they have not taken advantage of that option yet, a force that could boost stocks once it's employed, according to well-known strategist Thomas Lee.

"Since the start of 2016, NYSE margin debt and the S&P 500 have diverged," said Lee, who is head of research at Fundstrat Global Advisors, an independent research boutique firm he founded two years ago.

Lee explains that from 2008 through the end of 2015, margin debt levels tracked pretty closely the performance of the S&P 500. So as the market went up, investors used their brokerage accounts to purchase securities on margin.

This year, however, as the S&P benchmark climbed to a new high, margin levels trended in the opposite direction as shown on the chart below.